PAYROLL INSIGHT
In June, Professional in Payroll, Pensions and Reward invited several industry luminaries to participate in a virtual roundtable articulating their views on the highly topical issue of optional remuneration arrangements (OpRA). Legislation came into effect from 6 April 2017 affecting employers’ salary sacrifice and flexible benefits arrangements Phantoms of the OpRA
Phantom (noun): a ghost; a figment of the imagination; not real, illusory; denoting a financial arrangement or transaction which has been invented for fraudulent purposes ( Oxford English Dictionary ) Participants Susan Ball, partner, Employment Tax & Advisory Services, Crowe Clark Whitehill LLP Richmal Price, payroll advice team leader, Employment Advice Services Department, Peninsula Claire Treadwell, senior bureau manager, IRIS Software Group and Cascade Human Resources Samantha Mann MAAT, MCIPPdip, senior policy & research officer, CIPP In your experience, what is/ was the extent of employers’ misunderstanding, misuse and abuse of salary sacrifice (for example, not paying the national minimum wage, making mistaken pre-tax ‘deductions’)? Susan: Salary sacrifice schemes have
been around for many years and yes, there were some pockets of employers who made mistakes, such as failing to check national minimum wage. However, these were generally isolated cases in my experience. Some schemes marketed, from what I observed, did try to stretch the rules; for example, iPads using the ‘not significant private use’ rule (section 316(2) and (3) of the Income Tax (Earnings and Pensions) Act 2003). I am not sure employers always sufficiently check HMRC’s guidance at EIM21613 with examples was applied and the employee did meet the criteria, and not hand over the iPad to the family to use. Previously, when HMRC found salary sacrifice arrangements they were not keen on – such as for canteens, travel and subsistence – they put a stop to them with specific legislation rather than an across- the-board change. It would have been better to consider the same approach here. (Section 60(4) Finance Act 2010 would appear to be the first time the term ‘salary sacrifice’ is specifically referred to in legislation.)
It was clear from previous Budget statements and the consultation document that due to an increase in schemes for more luxury products the government wanted to clamp down on salary sacrifice schemes. I believe both employers and HMRC will have issues in applying the new rules from 6 April 2017 as there are still some areas which need to be clarified: ● What for example constitutes a variation under the rules and triggers the removal of grandfathering provisions early? ● What can/can’t you negotiate pre- employment and how do these rules impact? I understand HMRC are working on updated guidance and that it will be released soon. Hopefully it will address these issues. Claire: Often when we take on new clients the pay/deductions are set up incorrectly – normally with pension contributions often taxing the salary sacrifice element. We have also come across elements that have been set up as salary sacrifice by mistake. On many occasion we have had to recalculate pension contributions due.
| Professional in Payroll, Pensions and Reward | September 2017 | Issue 33 26
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